Materiality Principle

The concept that financial information is significant only if its omission or misstatement could influence decisions of reasonable users of financial statements.

#Accounting Principles and Standards#Financial Reporting#Professional Judgment

Materiality Principle

The accounting concept that financial information is material if omitting or misstating it could influence decisions made by users of financial statements. Only material information needs to be properly recorded and disclosed.

For example, a large corporation might establish a policy that expenditures under $10,000 can be immediately expensed rather than capitalized, as this simplification would not materially affect the financial statements or user decisions.

Materiality is both quantitative and qualitative, requiring professional judgment to determine what information would matter to financial statement users. This principle allows for practical simplifications in accounting procedures while ensuring that all significant information is properly presented.